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Two Reasons Why Monopolies Should Care about Customer Effort

The best way to create disloyal customers is to make them feel like they had to put a lot of effort into resolving an issue; this also has important implications for firms that have few or no competitors

The effort that customers have to put in to find the answer to a question or resolve a problem that they have with a company’s products or services is incredibly important. This is not just based on a vague claim that a company should care about its customers – although it should – but the far more precise point, based on the analysis of millions of customer interactions, that reducing “customer effort” is the best way to reduce customer disloyalty.

But what does this mean for a company that has few, if any, competitors, such as a utilities company for example. If customers will always have to repurchase your products or services, should you still care about customer loyalty and therefore customer effort? In short, yes. Even if your customers are basically “captive,” there are two major reasons why customer effort is important.

  1. Reducing customer effort reduces the cost to serve them: Customer loyalty isn’t the only high-level corporate goal that is related to customer effort. What tends to increase effort also tends to increase costs. Analysis of a dataset of more than 145,000 customer responses backs this up (see chart 1), and shows that factors causing these higher costs include:

    • Customers having to speak with multiple contacts.

    • More time taken to handle the customer interaction.

    • Having to negotiate unclear or redundant policies and processes.

    • Poorly skilled reps that can’t help customers as efficiently as they might.

    • Limited technology that also prevents making it as easy as possible for customers to resolve their issue.

    So even if customer loyalty isn’t a priority, optimising a “low-effort customer experience” will minimize service costs.

    Chart 1: Cost to serve by customer effort* level  Average cost; n=145,418 customers  Source: CEB 2015 Effortless Experience Dashboard.

    * – “Effort” comprises ease of handling the issue (if contact is worth the effort) and relative time required. Lower numbers are better.

  2. No one wants to go “viral”: Customer loyalty is made up of three main components:

    1. Intent to repurchase.

    2. Increased wallet share.

    3. Positive word of mouth.

    While the first two might not matter to a company if there’s no or minimal competition for customers, the third definitely should. Poor customer service experiences are much more likely to create negative word of mouth than excellent customer service experiences are likely to create positive word of mouth.

    In fact, 65% of customers with a negative service experience will spread negative word of mouth while only 25% of customers with a positive service experience will spread positive word of mouth. If a company doesn’t provide a low-effort experience, it is highly likely that customers will spread negative word of mouth – and spread it widely. 78% of customers with a negative service experience spread their negative word of mouth to four or more people.

    And while this widespread negative word of mouth may not directly affect the bottom line, if it grows or “goes viral,” it will certainly affect the public perception of your brand. And this is likely to trickle into how customers perceive their customer service experiences with you and the “baggage” they bring into the live service interaction. This will increase the likelihood of a longer, more difficult, or escalated call.


More On…

  • Effortless Experience Infographic

    Learn more about what types of customer service reps provide the best kind of service.

  • The Effortless Experience

    Learn more about CEB, now Gartner's work on how helping customers solve problems quickly and easily is the most successful way to build customer loyalty.

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